Could Trump’s Small Business Policies Tilt the Electoral Map? It Depends on Tax Reform

Entrepreneurs anxious to add jobs and spur economic growth are cheered by the president's new tax and regulatory initiatives.

This is a huge incentive for small companies to take the risk of expanding their operations beyond what they might otherwise contemplate, especially in a sluggish, low-growth economy where consumer confidence is still recovering from the Great Recession.

Its supporters, including the non-profit Tax Foundation, say full expensing will create a tipping point for small businesses to jump into the economy pro-actively, allowing more workers to be hired more rapidly. Small businesses typically account for two-thirds of all new jobs created in the economy though some analysts say the figure is closer to just over half or even just a third, if you only count the smallest of small businesses (those employing 50 employees or less).

Whichever measure is used, full-expensing is likely create a real job growth spurt – good news for small businesses and of course, good news for Trump politically, too.

But not everyone supports the new initiative. In fact, other business conservatives inside the GOP – especially those representing larger corporations – see full-expensing as a threat to their larger tax-cutting agenda. These Republicans prefer to prioritize Trump’s call for a reduction in the corporate tax rate and worry that the already narrow path for tax reform cannot accommodate both provisions.

Like the complicated horse-trading on alternatives to ObamaCare, which eventually could not be managed, retaining full-expensing could prove to be a big challenge for Trump.

But it’s one that holds enormous political potential. Big business may contribute to super-PACS and help fund elections, but they are relatively few in number. Small businesses are potentially a larger voting constituency than veterans, Hispanics or African-Americans. The latest polls indicate that more than 60% of small business owners are highly optimistic about Trump and his agenda.

A decisive legislative victory on full-expensing could put even more of them squarely in the Republican camp – while providing real dividends for the economy.

It’s worth noting that some of the highest rates of new business start-ups were recorded in states that are considered “in play” in national elections. For example, Colorado, a key swing state, recorded the third highest rate of new business start-ups last year. Nevada, another swing state, had the sixth largest rate. And Arizona, a red state that is threatening to trend blue, had the highest rate.

The fate of full-expensing won’t be decided until later this year. But the implications seem clear: along with other measures aimed at stimulating small business, including a new and badly-needed infrastructure bill, Trump’s more “populist” approach to the economy could expand the GOP’s political base in ways that past Republican – to say nothing of Democratic – candidates would hardly have imagined.